The Pre-Budget Survey says India’s economy has moved to a higher growth trajectory, but sustaining the momentum requires reforms, reports G Choudhury. See graphics

India’s economy has moved to a higher growth trajectory, but sustaining the momentum requires bold policy moves, the Finance Ministry said in its annual state-of-the-economy report.

<b1> Coming at a time of turmoil in global financial markets, the Economic Survey warned of a possible spike in inflation — and how it could make the task of sustaining growth even more daunting. “The new challenge is to maintain growth at these levels, not to speak of raising it further to double digit levels,” it said.

But that objective must be tailored to the need to keep prices under check, Finance Minister P Chidambaram said after the Survey was tabled in parliament. “Optimism with caution” would be the watchword for 2008-09, he said.

The Survey contains prescriptions which may not necessarily translate into actual policy, or form a part of the Budget that will be presented on Friday. It does, however, provide clues to medium-term policy direction.

This Survey pushes for reviving the disinvestment process, which has been put on the back burner under communist pressure. Expectedly, it found instant favour with India Inc., and triggered strong criticism from the government’s leftist allies.

“The finance minister seems to be accountable to the market and not to the National Common Minimum Programme. The Finance Ministry has taken the same beaten path,” said Nilotpal Basu, CPI(M).

TK Bhaumik, economist with Reliance Industries Limited, echoed broad industry sentiment when he said: “Reforms and further liberalisation is necessary to attract foreign investors to India, more so at a time of global economic uncertainty.”